If the reverse ICO trend continues, we will see more major corporations begin to tokenise their platforms

Ok, I’m assuming you have all heard of Bitcoin, and those of you with even a slight interest in cryptocurrencies would be familiar with some of the major altcoins (currently what coins that are not Bitcoin are called) such as Litecoin, Ripple and, of course, Ethereum.

Altcoins are generally developed to solve a specific requirement or improve on a known problem faced by Bitcoin. Litecoin, for example, was created by Charlie Lee (ex-Google employee) to provide a coin that has a much faster transaction speed than Bitcoin, making it a more attractive option for use as a micropayment platform.

What’s a shitcoin?

As of late last year there were 1,368 altcoins in circulation, most of which are now pretty much worthless – in fact, so many have become worthless that they have developed a new class of coin called ‘shitcoin’.

Most of them are the product of an initial coin offering (ICO), which is where the creators of the coin run a presale for their tokens/coins allowing investors and then the general public to buy in at a discounted rate before the coins hit the exchange.

ICOs were really popular as everyone welcomed the chance to “get in” on new projects before they had launched, with the potential to make a killing on the exchange (assuming that the project is completed and listed).

And there’s the problem. Most of these projects were based on a “polished white paper” and a dream, so once the ICO ended and the project creators had raised a few million dollars their incentive to complete the project was often reduced. Consequently, investors lost a lot of money.

Also read: Ironic as it may seem, the future of ICOs will rely on regulation

Maturing markets and new ICO trends

Now that the market has matured, a new class of ICO has emerged called the ‘Reverse ICO’, which is when an established company ‘tokenise’ their already popular platforms. This means that the new altcoin they create is already connected to a successful platform, with an established user base ready to automatically take up the use of the token.

That’s why the reverse ICO method is proving to be very popular for companies looking to expand their service offerings whilst at the same time raising capital — which in turn will be used to generate more revenue.

The most anticipated reverse ICO of 2018 was by a fast-growing social media platform called Telegram. The Telegram reverse ICO was so popular that the founding team had to call off their public sale — after raising a whopping $1.7 billion from private investors.

Examples of reverse ICOs

One of the hottest blockchain events among the crypto community is the San Francisco Blockchain Economic Forum. The event brings in world-class speakers like Tim Draper (DFJ Fund), Vinny Lingham (Civic), and Bobby Lee (Bitcoin Foundation). During the event, a company called PlayChip took out the ‘Draper Hero’s Choice Award.’

The interesting thing here is, why did PlayChip win? Well, it’s because the company can be classified as a “reverse ICO.” On launch the PlayChip will already be the exclusive gaming token to 6 platforms with a user base of over 500,000 members, making it a stand out from normal ICOs.

Also read: Planning to ICO? Here are 10 top lists that can help you get more visibility

Another good example of a reverse ICO is the social networking platform Kik, which has a user base of over 300 million users. Here’s a bit of a backstory as to why the company decided to do a reverse ICO: Kik was funding itself via ad-revenue and found it difficult to compete with Facebook Messenger and WhatsApp due to the enormously deep pockets of their parent. To compete, Kik shifted to a blockchain-based revenue model and generated their own token called, “KIN.” Along with providing incentives based on user-activity and creating more lucrative opportunities for developers, they raised $100 million dollars.

What does the future look like for reverse ICOs?

If the reverse ICO trend continues, we will see more major corporations begin to tokenise their platforms. Once this occurs, we may really start to see the full scale adoption of cryptocurrencies around the world.

For example, Western Union could create their own token to pre-empt the disruption that mass adoption of a global cryptocurrency could cause to their international money transfer business, and thus help them avoid becoming the next Blockbuster. I’m betting that scenarios such as this will spark companies in industries ripe for blockchain disruption to make the first move, and create a tokenised version of their own platforms.

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